Any lingering hopes of a reprieve for North Sea oil workers from an unpopular tax reform were dashed by the Chancellor today.
The Treasury used its Budget to reiterated that changes to off-payroll working rules would go ahead as planned from April 6.
The Press & Journal reported last week that scores of contractors were poised to leave the North Sea oil and gas sector over the imminent reforms.
The rules, known as IR35, were first implemented in 2000 to make sure individuals registered as freelancer contractors, but who are effectively employees of a company, are paying the right level of tax.
To improve compliance, the government in 2017 made public sector organisations responsible for determining employment status.
From early next month, that reform will be extended to every medium and large private sector business in the UK.
Large numbers of oil workers are currently operating as “personal service companies”.
The UK Government launched a review earlier this year to “address concerns” from individuals and businesses.
Publishing its findings at the end of February, the Treasury said it valued the vital role that the self-employed had in the UK labour market, but confirmed the reform would go ahead in April, albeit with some amendments.
It said non-compliance was widespread and forecast to cost the Exchequer more than £1.3 billion a year by 2023-24.
The Treasury said the taxman would take a “light touch” at first. Businesses will not have to pay penalties for inaccuracies in the first year, except in cases of “deliberate non-compliance”.
The review was trashed by Andy Chamberlain, deputy director of policy at the Association of Independent Professionals and the Self-Employed (IPSE), who complained that tweaks to the “catastrophic policy” went “nowhere near far enough”.
But in today’s Budget, the Treasury said addressing unfairness and non-compliance was the right thing to do and that the reform would be implemented, as previously announced.
Union boss Jake Molloy said the IR35 principles were right, but that oil and gas companies were not applying the rules fairly.
He said oil production firms and large contractors were not hiring significant numbers of workers on a full-time basis.
Instead, they are having to sign on with an agency, or “umbrella company”, and are making all of the payments expected of a full-time staff member, but receiving “none of the benefits”.
Today’s Budget did not contain any new legislative changes for a UK oil and gas industry battered by low oil prices, according to Derek Leith, global oil and gas tax lead at accountancy firm EY.
The price drop was caused by the breakdown of an international agreement on production cuts and low demand brought on by the coronavirus spread.
Mr Leith said the Budget was an example of a Chancellor “holding steady”, and welcomed the approach.
He said: “In recent years we’ve seen significant change to the tax landscape for the oil and gas sector, with successive governments acknowledging the maturity of the basin and the need to have stable fiscal conditions for investment.
“Last weekend’s drop in oil price demonstrates that there is significant volatility in the sector with global demand faltering and supply side discipline disappearing.
“A return of the oil price to the $55-$65 range would be beneficial to the industry as it seeks to maximise economic recovery whilst taking steps to decarbonise production facilities.
“A stable oil and gas industry in the UK offers the best possible foundation for the Oilfield Services sector and supply chain to start to transition its technical competence into alternative energy.”
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